SIP or Systematic Investment Plan is the investment option offered by Mutual fund company to the investor where small amount on regular basis (usually monthly) is invested in buying units of a mutual fund. You can read more about on our SIP page.
Example: Investor want to accumulate 180,000 over 3 years of time span and expecting high return on it. However, As of now Investor does not have all 180,000 required to purchase mutual funds as a purchase but has capacity to invest 5000 on monthly basis. In this case investor has to choose SIP as option to buy mutual funds on monthly basis and still can accumulate 12* 3*5000 = 180,000.
In this scheme lump sum purchase of mutual fund units is done on a single day or within a
week/month. However, specific amount on regular basis is withdrawn from the investors account. This
amount is generated by selling out small number of units from the lump sum purchase. Investor can
decide his/her withdrawal amount in SWP plan. As per the amount mentioned by investor specific units
Systematic Transfer Plan (STP) is a investment option offered where investor can purchase lump sums
mutual funds units in a one scheme and can transfer it to another scheme. Yes you are right!!!. You
can switch from one scheme to another scheme and transfer fixed or variable amount to other schemes.
As investment in mutual funds comes with inherent market volatility and high risk it might happen
that one scheme of equity / debt funds are not performing well. Thus, it is beneficial to switch or
transfer from one scheme to another which is why STP is preferred.